China Restricts Use of Bitcoins

Government prohibits financial institutions from handling transactions in the virtual currency.

China’s central bank barred financial institutions from handling bitcoin transactions, moving to regulate the virtual currency after an 89-fold jump in its value sparked a surge of investor interest in the country.

Bitcoin plunged more than 20 percent to below $1,000 on the BitStamp Internet exchange after the People’s Bank of China said it isn’t a currency with “real meaning” and doesn’t have the same legal status. The public is free to participate in Internet transactions provided they take on the risk themselves, it said.

New rules for bitcoin may not clarify bitcoin’s legal status, as regulators are divided over the issue, the people said. People are free to trade bitcoin even as China refrains from recognizing it as a currency in the short term, PBOC’s Deputy Governor Yi Gang was cited by the 21st Century Business Herald as saying last month.

Bitcoin prices are unsustainably high, and the virtual money isn’t currency, Greenspan said in a Bloomberg Television interview from Washington yesterday.

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